Household Portfolios and Implicit Risk Preference

Alessandro Bucciol and Raffaele Miniaci

The Review of Economics and Statistics, 2011, vol. 93, issue 4, 1235-1250

Abstract: We derive the distribution of a proxy for the risk tolerance in a representative sample of U.S. households. Our measure is deduced from the willingness to bear risk as indicated by the variance of returns of each household's observed portfolio. The estimates, obtained assuming constraints on portfolio composition, show substantial heterogeneity across households. We find that risk tolerance falls with age and increases with wealth. Other variables, such as education, gender, race, and household size, do not have a significant relation to risk attitude. Our findings are robust to changes in portfolio definition, asset returns, and sample composition. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2011
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Working Paper: Househould portfolios and implicit risk preferences (2010)
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